The pickle and the prize – why the future is bright for trade with India?

19 November 2018

 

Destination India - 31223_Website_Thumb_Image_800x450_ER_25.01.18.v3

In the early 1960s, my grandfather was promised an exciting new future in the UK on one condition: that he make two tonnes of homemade Indian pickle, ship it to the UK and sell it in a shop in Birmingham. Whether it was actually two tonnes is lost in family mythology, but what it represents is the important thing: an attempt at making the most of early signs of trade openness between the UK and India.

Against the backdrop of a tense colonial history, decades of protectionism and a nexus between politicians and business, it’s fair to say that this attempt could have got my grandfather in quite a pickle. Trading between the UK and India has not always been the easiest. In recent years, bureaucracy is often cited as a major barrier to cross-border trade. According to the World Bank, it takes 106 hours to overcome border compliance when exporting from India and 265 hours to import, compared to 24 hours to export and three hours to import into the UK. Corruption is also endemic: in 2018, India ranked 81 out of 180 in Transparency International’s Corruption Perception Index.

Despite the challenges, the size of the prize of trading with India is substantial.  Here’s why:

The Indian government is prepared to invest political capital in promoting trade

Earlier this year, Indian Prime Minister Narendra Modi, claimed that he’d like to replace red tape with red carpets for foreign investors in India. He has also proudly proclaimed that India is “open for business” and has led an overhaul of outdated policies, political thinking and laws. While the benefits of these moves are yet to be fully reaped, such policy decisions and rhetoric have sent an important signal across the globe about India’s readiness to reform and trade.

But what’s the reality behind the hyperbole and what do trade prospects really look like between the UK and India? After speaking to our Economics team, I gained a better idea of where we’re headed.  

India’s economy will be bigger than Europe’s by 2050

India boasts a young dynamic and skilled workforce that is progressive in its ambition, thinking and ways of working. This is particularly the case in disruptive businesses; India ranks 3rd in the world for number of active unicorns (i.e. start-ups valued at over $1 billion) with 13, behind only the USA and China.

According to our World in 2050 analysis, emerging markets will dominate the world’s top 10 economies, with India set to be the second largest economy in the world in 2050, boasting a 15% share of world GDP in PPP terms. To put this into perspective, it is predicted that the EU27 will make up only 9% of world GDP by the same year.

This presents a big opportunity for the UK.  By building and nurturing trade links with India, the UK can not only help spur India’s growth, but also reap the benefits from it, through greater opportunities for businesses and investors.

Leaving the EU is an opportunity for a refreshed trading relationship

As Mr Modi once put it, the UK and India are an “unbeatable combination.” This is a big claim – but as the UK begins to forge new relationships with economies across the world, one of the world’s fastest growing, opening, exciting and vibrant countries should be high on its agenda. Sharing ideas, goods and services between the oldest and the largest democracy in the world is bound to unleash massive economic potential.

Recently, India and the UK’s trade relationship has strengthened, with Britain’s goods and services exports to India increasing by 32% in the year to March 2018. The big questions now of course, are if, when and in what shape a UK-India trade deal will emerge as we leave the EU. This will require patience, but analysis shows we’re in a strong position in the coming years.

The UK is India’s 6th largest export market with a comparative advantage in the goods market. As we prepare to leave the EU, a variety of opportunities will open up with India. Healthcare and manufacturing look particularly strong in terms of future exports; India’s pharmaceutical sector currently provides 20% of the world’s generic medicine and is expected to grow by 50% by 2020.

There may be some bumps along the way, but the time is right for UK businesses to realise the potential of the Indian market – and the prize is big. With determination from policy makers and engagement with businesses, progress in opening up India’s economy and making it conducive to trade will likely continue.

So when it comes to trading with India, there’s definitely no need to get in a pickle.

If you’re interested in learning more about PwC’s work in the area of UK/India bilateral relations, or are setting up your business in either the UK or India, please visit our webpage on www.pwc.co.uk/india

 

Krishna Joshi | Manager, Strategy&
Profile | Email | +44 (0)7808 798765

 

More articles by Krishna Joshi

Twitter
LinkedIn
Facebook
Google+

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated and will not appear until the author has approved them.